Key Morningstar Metrics for Magna International
- : C$112.00Fair Value Estimate
- : ★★★Morningstar Rating
- : NoneMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
What We Thought of Magna International’s Earnings
Magna International’s MG stock fell on July 31 despite second-quarter adjusted diluted earnings per share of USD 1.86, which comfortably beat the USD 1.50 LSEG consensus. Management also increased 2026 guidance for free cash flow and adjusted EPS; the latter is now USD 6.70-USD 7.30, up from USD 6.25-USD 7.25.
Why it matters: Although second-quarter EPS got a USD 0.09 benefit from a lower-than-expected tax rate that won’t repeat in the second half, we believe the firm reported a good quarter on a day when nearly all automotive stocks are selling off.
- Free cash flow for the quarter more than doubled to USD 617 million while adjusted EBIT rose 16.1% year over year on Magna’s ongoing operational excellence initiatives boosting efficiency, revenue growth outperforming industry light-vehicle production growth, and foreign-exchange benefits.
- 2026 revenue guidance was cut, but only at the midpoint, by just under 1%. The change was entirely due to foreign-exchange expectations of a stronger US dollar against the Canadian dollar and euro, as well as an acceleration of timing for divestitures in the lighting and roof systems businesses.
The bottom line: We see no reason to change our investment thesis on no-moat Magna. We are leaving our US-dollar-denominated fair value estimate at USD 80 but increasing our Canadian-dollar-denominated fair value estimate to C$112 per share from C$109 after using a stronger US dollar in our currency translation.
- The majority of Magna’s profit margin boost came from operational excellence, foreign exchange, and tariff recoveries, which we see as management delivering on the turnaround it talked about the past few years.
- We like that Magna is buying back its stock below our fair value estimate. Second-quarter buybacks totaled USD 465 million for 7.4 million shares, and another 2.67 million shares (for USD 176 million) were purchased after June 30. Management intends to buy back the remaining 6.5 million shares in its plan by November.
